Ray of Light for the Physician Payment Sunshine Act Reply

The Physician Payment Sunshine Act (PPSA) may shed even more light on payments to physicians than previously expected. PPSA is the part of the health care reform act that will require pharmaceutical and device companies to report their payments to physicians and other healthcare workers and organizations. However, many observers thought a major loophole of PPSA was that it would not require disclosure of payments for continuing medical education (CME) programs funded through third parties like medical education companies, medical schools, professional organizations like the American College of Cardiology, and disease advocacy organizations.

But now CMS has finally published its proposed rules for the implementation of PPSA, and it appears likely that industry will have to disclose payments received by physicians for their participation in CME programs. The proposed rules mean that industry will have to disclose all payments when it is “aware of the identity” of the recipient. CMS gives the example of a third party payment to a department chair at a hospital:

…this payment would need to be reported because even though the applicable manufacturer did not name the recipients, their identities are publicly available…. In addition, we propose that awareness of the identity of the covered recipient by an agent of the applicable manufacturer will be attributed to the applicable manufacturer.

The medical education companies and medical organizations that heavily rely on industry funding may fight hard to prevent implementation of this rule. Already, the owner of a medical education company, indulging in Clintonesque parsing of the word “aware,” has written a lengthy polemic attacking the proposal.

Yale University’s Joe Ross, a researcher who has published on conflict of interest issues, provided the following comment to CardioBrief:

While I was quite encouraged by the passage of the PPSA, I had reservations about the possibility of industry moving payments through third parties to avoid public disclosure. The regulations recently released by CMS suggest that the agency has defined their purview quite broadly, such that payments from industry to third parties, who in turn provide payments or other transfers of value to physicians or teaching hospitals must now be reported. This is good news for those of us advocating for greater transparency.

Here is the relevant section of the CMS discussion of the rule:

(5) Indirect Payments Through a Third Party

Section 1128G(e)(10)(A) of the Act also excludes the reporting of payments or other transfers of value that an applicable manufacturer makes indirectly to a covered recipient through a third party when the applicable manufacturer is unaware of the identity of the covered recipient. However, any payment or other transfer of value provided to a covered recipient through a third party, whether or not the third party is under common ownership with an applicable manufacturer or operating in the U.S., must be reported, if the applicable manufacturer is aware of the covered recipient’s identity.Show citation box

This exclusion hinges on whether an applicable manufacturer is “unaware” of the identity of the covered recipient. To ensure that payments via third parties are reported, where appropriate, we propose that an applicable manufacturer is aware of the identity of a covered recipient if the applicable manufacturer has actual knowledge of, or acts in deliberate ignorance or reckless disregard of, the identity of the covered recipient. For example, if an applicable manufacturer provides a payment through a third party to the department chairs at a specific hospital, this payment would need to be reported because even though the applicable manufacturer did not name the recipients, their identities are publicly available. This standard is consistent with the knowledge standard set forth in many fraud and abuse laws, including the False Claims Act, and we believe it is one with which applicable manufacturers are already familiar. In addition, we propose that awareness of the identity of the covered recipient by an agent of the applicable manufacturer will be attributed to the applicable manufacturer.

Update: Click here to read a thoughtful analysis of this topic by Dan Carlat. Carlat makes a persuasive case that the CMS proposed rules should not come as a surprise:

In closing this loophole, CMS officials were hardly acting on their own—they were simply implementing the Sunshine Act as it was approved by Congress.

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